UH-OH: SEEMS LIKE CHINA'S PANIC SELL-OFF IS BEGINNING TO SPREAD...

REUTERS:

Japanese stocks tumbled on Wednesday in their biggest drop in more than a year, as fears grew that a relentless selloff in Chinese shares could ripple through its economy and hurt Japanese companies exposed to the Asian giant. Construction equipment makers Komatsu Ltd and Hitachi Construction Machinery, which derive sizable revenues from their China operations, skidded 5.8 percent and 4.0 percent, respectively. The Nikkei average fell 3.1 percent, its biggest fall since March last year, to a seven-week low of 19,737.64 while the broader Topix shed 3.3 percent, its largest decline in almost a year and a half. The Topix fell to a two-month closing low of 1,582.48, with turnover hitting 3.39 trillion yen, about 45 percent above the average in the past year. Trading volume in the Nikkei futures front-month contract  hit the highest level in almost six months.
    The selling frenzy was sparked by yet another plunge in Chinese shares, which have lost more than a third of their value in just one month despite stepped-up emergency support measures from Beijing. Investors worry that market rout could deliver a fresh blow to an already slowing Chinese economy.
    "Today is a 'China day'. This is going to affect the real economy. Chinese people who had made fortunes on stocks should have been spending a lot but that is likely to change," said Seiki Orimi, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
    As concerns about Chinese economy hit commodity prices, trading houses, which have big commodities business, also tumbled. Sumitomo Corp fell 5.2 percent while Mitsubishi Corp 3.7 percent.  "The ripple effect from the market correction (in China's economy) has yet to show up," wrote Bank of America Merrill Lynch analysts in a note. "We expect slower growth, poorer corporate earnings, and a higher risk of a financial crisis."  Itochu Corp fell 9.2 percent, taking an extra hit from a Nikkei business daily article that its plan to buy a stake in Bosideng International Holdings was rejected by the Chinese apparel company's shareholders. Other casualties included tourism-related shares, which have benefited from shopping sprees by a surging number of Chinese tourists visiting Japan. Department store operator Isetan Mitsukoshi fell 3.9 percent. 

THE CHINESE HAVE VERY LITTLE LEFT THEY CAN DO TO HALT THE PANIC.
THE RIPPLE EFFECTS HAVE NOT BEEN FELT YET ALL THROUGH THE CHINESE ECONOMY. BUT WHEN THAT OCCURS - AND IT WILL SOON, THEN THE CONTAGION WILL SPREAD.

AS WILL THE GREEK CONTAGION.

IF OIL CONTINUES TO DECLINE, THEN THAT COULD SPREAD TO OTHER COMMODITIES, AND THEN A GLOBAL CRASH BEGINS.

STAY TUNED...